Identifying the Drivers of Direct Economic Losses from Storm Surge Disasters: A Two-Stage Panel Empirical Analysis to Support Sustainable Coastal Zones

Direct economic losses from storm surge disasters are driven jointly by natural hazard factors and socioeconomic exposure. Because loss data are inherently zero-inflated and right-skewed, a single linear model cannot adequately capture them. Using a balanced panel of 11 coastal provinces in China over 2001–2024, this study decomposes the loss-generation process into two stages—whether a disaster occurs and the magnitude of losses—and develops a two-stage (Hurdle-type) panel model, further employing instrumental-variable two-stage least squares (IV-2SLS) to address the endogeneity of disaster prevention and mitigation expenditure. The results show that, at the annual provincial scale, disaster occurrence is determined nearly deterministically by whether a storm surge process occurs, so that the disaster-occurrence probability equation exhibits complete separation and its coefficients are not separately identifiable. Conditional on disaster occurrence, storm surge height is the most robust positive driver of loss magnitude: each additional centimeter of storm surge height raises direct economic losses by approximately 1.5% on average, a finding confirmed by robustness checks that replace the dependent variable, winsorize the losses, exclude extreme samples, and apply two-way and wild cluster bootstrap inference. After correction for endogeneity with the proposed instrument, the positive effect of disaster prevention and mitigation expenditure weakens substantially and becomes statistically insignificant, indicating that the positive OLS relationship is not robust to the proposed IV specification. Accordingly, this study proposes differentiated disaster-management measures that distinguish the stages of disaster occurrence and loss magnitude and strengthen the monitoring and early warning of hazard intensity. These findings provide an evidence-based basis for sustainable coastal development and for enhancing coastal disaster resilience.